4. Compensation and Benefits.          (a) Base Salary and Bonus. During the Term, the Executive’s annual base salary (“BaseSalary”) shall be U.S. $200,000, payable in accordance with the Company’spayroll practices as in effect from time to time. The Executive’s Base Salary shall besubject to review and possible adjustment in accordance with the Company’s normal practices andthe terms of any Special Security Agreement governing the operations of the Company, but in noevent shall Executive’s Base Salary be less than the amount specified in the first sentence ofthis Section 4(a). In addition, during each year of the Term, the Executive may be eligible toreceive an annual cash bonus of up to 40% of the Executive’s Base Salary, subject to meetingreasonable objectives mutually established by OSIL’s COO and by the Executive.          (b) Stock Options. The Executive shall be eligible for participation in OSIL’s stockoption plans or share incentive plans which are now in place or may hereafter be established byOSIL. The Executive acknowledges that any grant of options or other share incentives to theExecutive are in the discretion of the board of directors of OSIL, subject to the terms of anySpecial Security Agreement governing the operations of the Company. Any stock options or othershare incentives so granted shall be subject to the terms and conditions of, and shall beadministered in accordance with, the formal plan under which they were granted.          (c) Benefits. During the Term, the Executive (and, to the extent eligible, hisdependents) shall be entitled, and hereby agrees, to continue to participate in the Company’sexecutive employee benefit plans in which he participated immediately prior to the Effective Date(including but not limited to health insurance and short and long-term disability insurance, withsubstantially the same levels of benefits and with substantially the same terms and conditions aswere in effect immediately prior to the Effective Date of this Agreement), and in any other suchplans that are generally made available to senior executives of the Company. All such benefitsplans in place as of the date of execution of this Agreement are listed in Appendix A to thisAgreement. The Executive shall also be subject to the same leave time policies as set forth in theCompany’s Employee Handbook (revised June 2004). The Company shall have the right to amend orreplace any such plans and policies, provided that such amended policies or new policies do notprovide materially lesser value or benefits than were provided under the policies in effectimmediately prior to the Effective Date of this Agreement. The Company shall not be obligated tocontinue to maintain the existing key-man life insurance policy on the Executive under which theCompany is named as the beneficiary or any life insurance policies which may be currently in placeto fund a purchase of the shares on the death of the Executive pursuant to the existingshareholders’ agreement among the Executive and of the Company’s shareholders.          (d) Expenses. The Company shall pay or reimburse the Executive for all reasonable businessexpenses incurred by him in the performance of his duties under this Agreement in accordance withthe Company’s policies and practices in effect from time to time following receipt from theExecutive of written substantiation of such charges which is acceptable to the Company. The Companyshall continue to provide the Executive with one or more corporate credit cards to be used by theExecutive solely for Company business, subject to the Company’s policies governing such use.
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          (e) Vacation. The Executive shall be entitled to 4 weeks vacation per year, inaccordance with the policies regarding vacation as set forth in the Company’s Employee Handbook(revised June 2004).          (f) Auto Allowance: The Executive shall be entitled to a company leased or ownedautomobile with an MSRP not to exceed $30,000 during 2006, which amount shall be adjusted at thetime that a new automobile lease is entered into by a percentage equal to the percentage increasein the U.S. consumer price index between January 1, 2006 and the date of the new lease. TheCompany will cover the lease payments and cost of automobile insurance premiums, maintenance andservice respecting such vehicle. The Company shall have discretion in determining the duration ofany such lease in accordance with reasonable commercial practices.     5. Termination of Employment. The Executive’s employment may beterminated in accordance with the following:          (a) Death. The Executive’s employment shall terminate upon his death.          (b) Disability. The Company may terminate the Executive’s employment if, in the goodfaith judgment of the Board, the Executive becomes physically or mentally unable to substantiallyand completely perform his duties hereunder for a period of 90 days during any six-month period orfor any 90 consecutive days. To assist the Boardin making this determination, the Executive agreesto submit, at the request of the Board, to a physical and/or mental examination by a physicianmutually selected by the Board and by the Executive’s personal physician, and to grant to theBoard, and any physician it designates, access to all relevant medical information concerning himand to cause his own physicians to be available to discuss his health with the Board.          (c) Without Cause. The Company may terminate the Executive’s employment at any timeupon providing thirty (30) days written notice to the Executive.          (d) Voluntary Termination. The Executive may terminate his employment for any reasonor no reason upon providing the Company thirty (30) days written notice of termination.          (e) Cause. The Company may terminate the Executive’s employment at any time,effective immediately, for Cause. “Cause” shall mean any of the following: (i) actions by theExecutive which materially damage the Company’s or an affiliate’s business or reputation; (ii) theExecutive’s violation of any material policy, standard, rule, or practice of the Company, if suchviolation in fact causes material damage to the Company’s or an affiliate’s business orreputation; (iii) the Executive’s breach of his fiduciary duties to the Company or its affiliates,if such breach in fact causes material damage to the Company’s or an affiliate’s business orreputation; (iv) the Executive’s continued failure or neglect to substantially perform his dutieshereunder; (v) a breach of any material provision of this Agreement; (vi) the Executive’sconviction of, or plea of nolo contendere to, a felony, or (vii) the revocation of the Executive’scurrent level of security clearance from the U.S. government; *provided, however,*that the Companymay terminate Executive’s employment for Cause under subsections (i) through (v)
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hereof only if it provides written notice to the Executive of an intent to terminate for Cause,which notice specifies the grounds allegedly constituting Cause, and the Executive fails toreasonably cure or eliminate such grounds within thirty (30) days of his receipt of such notice;*and provided further,*that as used in this Agreement (including in section 8), the term“affiliate” means a company in which Offshore Systems International LTD (“Offshore”) or asubsidiary thereof has a majority ownership interest, and does not include joint ventures with theCompany or with Offshore or any of its subsidiaries, or any other entities with which Offshore mayhave a business relationship but not a majority ownership interest..          (f) Termination by Executive for Good Reason. The Executive may terminate hisemployment at any time for Good Reason. As defined herein, the term “Good Reason” shall mean anyof the following: (a) a material breach by the Company of any of its obligations hereunder; (b) amaterial diminution in the Executive’s duties or level of responsibility; (c) a reduction inExecutive’s Base Salary below the level specified in paragraph 4(a) or a material diminution inthe level or benefits provided to the Executive; (d) the relocation of the Executive’s place ofemployment, without Executive’s consent, to a location which is not within a radius of twenty (20)miles from the address specified in Section 3 above; and (e) any other actions or failures to actby the Company that would constitute a “constructive discharge” under applicable legal principles;*provided, however,*that the Executive may resign for Good Reason only if he provides writtennotice to the Company of an intent to resign for Good Reason, which notice specifies the groundsallegedly constituting Good Reason, and the Company fails to reasonably cure or eliminate suchgrounds within thirty (30) days of its receipt of such notice.     6. Obligations of the Company Upon Termination.          (a) Upon termination of employment by either the Executive or the Company for any reason, theExecutive shall be entitled to be paid (i) any earned but unpaid Base Salary, (ii) any Bonusearned but unpaid from the prior fiscal year, (iii) reimbursement for any expenses incurred by himbut unpaid as of the date of termination, and (iv) any earned but unused vacation due under theCompany’s Employee Handbook (revised June 2004), subject to the provisions of that Handbook. Theseamounts shall be payable in cash within 30 days of such termination date.          (b) Upon the Company’s termination of the Executive’s employment for any reason other than forCause in accordance with section 5(e), or upon the Executive’s termination of his employment forGood Reason, and in consideration for the Confidentiality and Non-Disclosure, Non-Competition andNon-Solicitation provisions hereof, the Executive will be entitled to the payment set forth inparagraph 6(a) above and, in addition, to the continuation of his Base Salary for a period oftwelve (12) months following such termination, payable as and when his Base Salary otherwise wouldhave been payable. The Company shall also pay for the cost of the Executive’s COBRA premiums for aperiod of twelve (12) months from the date of termination or until the Executive is fully coveredunder another employer’s group health plan, whichever date occurs first, and if Executive doesbecome fully covered within that twelve month period, he shall promptly notify the Company of thatfact. In the event payments are payable to Executive pursuant to this Section 6(b), no severancebenefits shall be payable to the Executive under any severance plan maintained by the Company.
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          (c) Executive’s entitlement to any compensation under this Section also is subject to theExecutive’s execution of a release of all claims against the Company; provided, however, that (i)such release does not impose any new obligations or restrictions on the Executive not encompassedwithin this Agreement and (ii) such release is reciprocal, containinga release of all claims that the Company may have against the Executive.     7. Confidentiality and Non-Disclosure.          (a) The Executive shall not, either during or after the Term, divulge or communicate to anyperson (except in performing his duties under this Agreement) or use for his own purposes or forthe benefit, purposes or account of the Executive or any other person, trade secrets, confidentialcommercial information, or any other information, knowledge, or data of the Company or of any ofits affiliates which is not generally known to the public, and shall use his best efforts toprevent the publication or disclosure by any other person of any such secrets, information,knowledge, or data. Confidential information includes, without limitation, information relating tothe Company’s business plans, financial matters, customers, employees, contracts, and all othersecrets and information of a confidential or proprietary nature. The confidentiality andnon-disclosure obligations imposed by this Section 7 will cease if such confidential orproprietary information becomes, through no fault of the Executive, generally known to the publicor the Executive is required by law to make disclosure (after giving the Company notice and anopportunity to contest such requirement). The terms of this Section 7 shall be in addition to theterms of any confidentiality agreement that may previously or contemporaneously herewith have beenexecuted by the Executive, which will continue in effect and be made a part of this Agreement, andshall not be read or interpreted to limit, diminish, circumscribe or conflict with the terms orrequirements of any such confidentiality agreement.     8. Non-Competition. The Executive agrees that during the Term, and for aperiod of one (1) year following the termination of this Agreement for any reason, he shallnotdirectly or indirectly, with or without compensation, be engaged in any work or activity fororwith, or have any financial interest in, any business materially in competition with, or whichmaymaterially compete with the Business of the Company (or with the Business of any affiliate forwhich the Executive performed substantial services hereunder) within any country, state,region,or locality in which the Company or such affiliate is then doing business or marketing itsproducts, as the business of the Company or such affiliate may then be constituted. Forpurposesof this Agreement, the Business of the Company and of any affiliate means (i) the provision ofresearch and development services and tools to Federal Government agencies responsible fornational defense, homeland defense, and healthcare clinical information management —specifically, in areas relating to training systems, cognitive engineering, decision supportsystems, and command, control, communications, computing, intelligence, surveillance, andreconnaissance (C4ISR) systems and (ii) any other business in which the Company is engaged asof the date of termination of this Agreement. Also, for purposes of this Agreement, theExecutive shall be deemed to be engaged in such a Business if he is a principal, agent,consultant, employee, officer, director, or partner, of any person, partnership, corporation,trustor other entity which is engaged in such a Business, and he shall be deemed to have afinancialinterest in such an entity if he has an equity interest, or interest convertible into equity,in anyentity engaging in the Business; provided, however, that the foregoing shall not prohibit theExecutive from owning, for the purpose of passive investment, less than two percent (2%) ofany
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class of securities of a publicly held corporation. The terms of the Section 8 shall be inaddition to the terms of any agreement previously entered into by the Executive, expresslyincluding that certain Share Purchase Agreement dated for reference November 2, 2005 among OSIL,the Company, the Executive and the other shareholders of the Company respecting the Purchase.     9. Non-Solicitation. The Executive agrees that for a period of two (2) year after thetermination of his employment for any reason, he will not, on behalf of himself or any person,firm, partnership, joint venture, corporation or other business organization directly or indirectlyinduce, solicit, or participate in the inducement or solicitation, either directly or through athird party, of any person who is an officer, director, employee, principal or agent of the Companyor any affiliate to leave his or her employment, agency, directorship or office with the Company orany affiliate, or to induce or solicit any person to not commence an employment or businessrelationship with the Company or any affiliate.     10. Company Ownership. Except to the extent required by any applicablegovernmental contract, statute, regulation or rule, the Executive hereby agrees that any and allimprovements, inventions, patents, patent applications, software, research, data reports,copyrightable works of authorship, concepts, discoveries, formulae, processes, methods, know-how,confidential data, trade secrets and other proprietary information (collectively, “Work Product”)within the scope of any business of the Company or any affiliate which the Executive may conceiveor make, or have conceived or made, during his employment with the Company shall be and are thesole and exclusive property of the Company or any such affiliate. The Executive shall, wheneverrequested to do so by the Company or any affiliate, and without any obligation on the part of theCompany or such affiliate to pay any royalty or other compensation to the Executive, at theCompany’s or affiliate’s expense, execute and sign any and all applications, assignments or otherinstruments and do all other things which the Company or its affiliate may deem necessary orappropriate (i) in order to apply for, obtain, maintain, enforce or defend letters patent in theUnited States or in any foreign country for any Work Product, and/or (ii) in order to assign,transfer, convey or otherwise make available to the Company or such affiliate the sole andexclusive right, title, and interest in and to any Work Product.     11. Injunctive Relief. The Executive acknowledges and agrees that the remedy at lawavailable to the Company for breach of any of his obligations under Sections 7 through 10 would beinadequate and that damages flowing from such breach may not readily be susceptible to beingmeasured in monetary terms. Accordingly, the Executive acknowledges and agrees that, in additionto any other rights or remedies which the Company may have at law, in equity or under thisAgreement, upon adequate proof of his violation of any such provision of this Agreement, theCompany will be entitled to immediate injunctive relief, and may obtain a temporary orderrestraining any threatened or further breach, without the necessity of proof of actual damage. Anysuch action may only be filed in a court of competent jurisdiction in the State of Delaware, andthe Executive consents to the personal jurisdiction and venue of such courts.     12. Security Clearances. The Executive acknowledges and agrees that maintaining hisexisting personnel security clearances with various agencies and departments of the Government ofthe United States of America will be a continuing condition of his employment with the Company.The Executive agrees to co-operate with the Company and such agencies and
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authorities and to provide such information as they may reasonably require to maintain suchpersonnel security clearances and to seek to obtain any increased level of security clearance thatmay be appropriate. The Executive hereby consents to the disclosure by the Company to suchauthorities of such personal information as has been provided by the Executive to the Company inconnection with his or her employment with the Company.     13. Confidential Disclosure and Insider Trading. The Executive acknowledgesthat:          (a) OSIL’s common shares are publicly traded;          (b) he will become privy from time to time to material information about OSIL or materialchanges in affairs of OSIL which have not been generally disclosed to the public; and          (c) that he is a “person in a special relationship” with OSIL and an “insider” of OSIL, asthose terms are defined under applicable Canadian securities regulations and may be an “insider”of OSIL under applicable U.S. securities regulations. The Executive further acknowledges that heor she has been provided with a copy of OSIL’s Corporate Governance Policy and Code of BusinessEthics which sets out OSIL’s polices concerning, among other things, the maintenance ofconfidentiality with respect to OSIL information and restrictions and prohibitions on trading inOSIL’s securities. The Executive agrees to comply with such policies, and acknowledges that amaterial breach of such policies will constitute a material breach of this Agreement. TheExecutive further acknowledges that it is his obligation to comply with all applicable laws andregulations respecting trading in securities of OSIL.     14. Notice. All notices or other communications hereunder shall be in writing andshall be deemed to have been duly given (a) when delivered personally, (b) upon confirmationofreceipt when such notice or other communication is sent by facsimile, (c) one day afterdeliveryto an overnight delivery courier or (d) three days after it has been sent by registered orcertifiedmail, return receipt requested postage prepaid, addressed to the addresses set forth below, ortosuch other address as either party may have furnished to the other in writing in accordance